Amazon’s (AMZN) cloud services unit, Amazon Web Services or AWS, suffered an outage that affected a range of company websites and apps such as Snapchat, WhatsApp and Slack on social media; Fortnite and Roblox (RBLX) in games; and Venmo, owned by PayPal (PYPL), in fintech. Early yesterday morning, AWS reported that they were experiencing high error and latency rates in the Virginia region, resulting in more than 11 million user reports about issues across various applications and platforms.
However, the cloud leader resolved the major issues within three hours of the outage and normal services mostly resumed by early afternoon. This also resulted in limited impact on the company’s stock. In fact, AMZN stock rose 1.6% in yesterday’s trading session.
However, the disruption has emboldened Amazon detractors to make stronger arguments for not owning AMZN stock, which is down 0.5% year to date (YTD). Additionally, skeptics have highlighted AWS’s shrinking market share in the cloud business while accusing it of being the “second Apple” in terms of its lack of AI initiatives. However, investors who ignore the company with a market capitalization of $2.3 trillion do so at their own risk. Because? Let’s analyze.
www.barchart.com
Amazon is not only an e-commerce giant, since in addition to being the world leader in cloud services, the Seattle-based company also ventures into streaming, logistics and consumer electronics. This business flywheel has resulted in the company reporting revenue and earnings CAGR of 15.80% and 39.90%, respectively, over the last five years.
Additionally, Amazon’s earnings have exceeded Street expectations consecutively for more than two years. Also in the most recent quarter, the company reported an increase in both revenue and profit.
In the second quarter of 2025, the company reported net sales of $167.7 billion, an increase of 13% year-over-year. This is remarkable growth for a company operating on such scale. AWS sales increased 17.5% in the same period to $30.9 billion. Furthermore, both the domestic and international segments experienced year-on-year (YoY) growth rates of 11% and 16% to reach $100.1 billion and $36.8 billion, respectively.
Earnings rose 33.3% year-over-year to $1.68 in the second quarter of 2025, easily beating the consensus estimate of $1.33, as the company predicted net sales to be in the range of $174.0 billion and $179.5 billion for the third quarter. The midpoint of this range would indicate annual growth of 11.2%.
Cash flows also remained healthy, as Amazon’s net cash from operating activities was $32.5 billion in the quarter, compared to $25.3 billion in the year-ago period. Overall, the company closed the June 25 quarter with a cash balance of $57.7 billion with no short-term debt on its books.
Finally, analysts are also convinced of Amazon’s growth prospects, forecasting revenue and profit growth rates of 10.74% and 37.80%, well above the industry medians of 3.03% and 6.46%, respectively. Amazon will report its third-quarter earnings on October 30.
As highlighted above, Amazon has a lot going for it. It is true that it requires large expenses and reduces margins in the short term, but in the long term, the profit can be quite juicy for Amazon shareholders. Notably, the company is currently engaged in an intense spending drive, increasing investments in automated logistics setups, expanded data center facilities, and customized artificial intelligence systems.
Furthermore, amid rumors suggesting AWS is falling in the rankings, the unit still controls a solid 30% slice of the global cloud pie. That advantage arises from its combination of seasoned technology, massive operational reach, layered partner ecosystem, and a reliable balance sheet. Additionally, its broad range of 200+ polished services spans everything from computing power (EC2) and data storage (S3) to database management (RDS, DynamoDB), AI tools (SageMaker) and serverless options (Lambda). Azure and Google Cloud, for all their strengths, feature more limited internal catalogs and rely more frequently on third-party providers, especially when assembling data or AI workflows.
Beyond that, AWS’ networking backbone and international expansion offer world-class growth potential and agile performance. Supported by more than 30 regions and 100+ availability zones worldwide, it keeps workloads running close to where users actually sit, eliminating delays, reducing outage risks, and easing compliance hurdles by managing data in-place.
Therefore, despite all the recent hurdles, AWS remains the lynchpin holding up the global cloud setup.
On the AI side, Amazon is launching homegrown silicon, such as the Trainium 2 chips, which are now reaching high-volume production. These processors are already in play for big advancements, such as powering the training behind Anthropic’s new Claude 4 release and powering parts of the Bedrock suite. Against standard GPU platforms, Trainium stands out with 30% to 40% stronger price performance.
Bedrock itself, Amazon’s turnkey center for developing generative AI builds, is seeing rapid uptake. As for the entry-level models, the team’s Nova is making real progress and now sits at No. 2 on Bedrock’s list.
Plus, the ad operation is firing on more cylinders, too, generating $15.7 billion during the second quarter, and that energy will spill over into the year-end frenzy as brands pour more cash into Amazon’s shopping and video streaming hub. Consider Prime’s more than 300 million loyalists, whose constant engagement keeps the wheels turning in a feedback loop: Busier users mean higher ad revenue, which then contributes to results on the e-commerce front.
So Amazon’s overall story is sustained by the raw heft of its online marketplace, the clever redistribution of customer insights into side gigs like one-off promotions or wellness nudges, and the self-sustaining pivot of its growing web of businesses.
Overall, analysts remain quite bullish on AMZN stock, giving it a “Strong Buy” rating, with an average price target of $267.30, denoting an upside potential of around 23% from current levels. Of the 57 analysts covering the stock, 50 have a “Strong Buy” rating, six have a “Moderate Buy” rating, and one has a “Hold” rating.
www.barchart.com
On the date of publication, Pathikrit Bose had no (either directly or indirectly) positions in any of the securities mentioned in this article. All information and data in this article are for informational purposes only. This article was originally published on Barchart.com
